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Negative Enterprise Value Stocks


rukawa
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According to this the returns of a negative enterprise value stock strategy in the US are 50% a year:

https://blogs.cfainstitute.org/investor/2013/07/10/returns-on-negative-enterprise-value-stocks-money-for-nothing/

 

You can do a screen for them on ft.com:

https://markets.ft.com/data/equities/results

 

My guess is that the reason for the outperformance is that they mostly go nowhere for long periods of time but every so often they pop. So if you have a diversified portfolio you almost never lose money but every so often there is a massive gain.

 

Anyways Nate listed one on his blog:

http://www.oddballstocks.com/2013/07/negative-enterprise-value-and-titanium.html

 

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I had my eye on this one SPRT...also not entirely sure if it's negative enterprise strictly defined, but life insurers seem extraordinarily cheap some of them trading at 0.5x tangible BV and less than 10x P/E.

 

Also check out NWLI. 1/2 TBV. Around 8x PE.

 

Despite all the huballo about interest rates 1/2TBV is a pretty good margin of safety.

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Graham mentions that one should show concern for buying cheap companies at the height of a market but what I never understood is if you are looking at every investment as buying shares in a business why should a cheap price dissuade you from buying in regardless of where the market is as a whole? Is it only because there may be even cheaper prices right around the corner?

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I had my eye on this one SPRT...also not entirely sure if it's negative enterprise strictly defined, but life insurers seem extraordinarily cheap some of them trading at 0.5x tangible BV and less than 10x P/E.

 

Also check out NWLI. 1/2 TBV. Around 8x PE.

 

Despite all the huballo about interest rates 1/2TBV is a pretty good margin of safety.

 

NWLI has traded well under TBV for years and the management seems uninterested in repurchasing shares or taking any other steps to do anything about it.

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Related thread:

http://www.cornerofberkshireandfairfax.ca/forum/strategies/screen-stocks-with-negative-enterprise-value/

 

Incidentally the main thing I am seeing when looking into negative enterprise stocks is a lot of chinese reverse mergers which I am avoiding. You can detect the reverse mergers by looking at the officers and directors on Google Finance. I guess I am racially profiling because I avoid anything with a Chinese name.

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SXCL was last time I checked. Below Net cash on balance sheet.

 

Issues with oil services exposure though.

 

I looked at SXCL last week. I believe it is trading just over net cash at the moment.

 

Their oil services businesses are strongly oriented towards the Bakken. This, in my mind, means they may be permanently impaired as E&Ps continue to move away from the Bakken in favor of the Permian, etc.

 

I can't say that I'm a fan of their sports segment either

 

 

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